Following today’s release of Next H1 figures for 2020/21, Emily Salter, retail analyst at GlobalData, a leading data and analytics company, comments: ‘‘Though a sobering set of results that illustrate the decimated demand for clothing & footwear due to COVID-19, Next’s H1 full-price sales growth exceeded expectations at -33.7%, and have continued to prove resilient with sales in the past seven weeks rising 4%. The retailer now expects FY full-price sales to fall between 17% and 29% in a worst case scenario, and it has significantly upped its profit guidance from £195 to £300m as its robust online platform and wide product range offers it some protection.
“Home, childrenswear, sportswear, lounge and underwear were the better performers during the period, with total full price sales falling -17% in contrast to that of the poor performing categories (including formalwear and holiday), which plummeted 53%. This ability to switch product focus to different categories is a luxury not afforded to many retailers, and will benefit Next as the new “rule of six” will drastically reduce the demand for occasionwear for the festive period, so Next can switch its product focus to more casual, cosy styles instead.
“The retailer’s 9% growth in online sales in Q2 is testament to the continuous improvements it has made to its online proposition over the last few years. Though other retailers will have experienced higher online sales growth, a significant proportion of Next’s sales already came from the online channel, standing it in good stead to deal with greater demand – for instance it is introducing 24 hour shifts to increase warehouse picking capacity. Online sales have been significantly stronger since stores reopened than prior to COVID-19, indicating that consumer habits have changed in favour of the online channel as they seek to avoid stores.
“There has been a significant difference in the fate of Next’s stores since reopening, with those located in retail parks by far the best performers with sales -15% versus last year in the period since reopening, given their larger size that will make many shoppers feel more comfortable. This is compared to -33% for regional shopping centres and -37% for city centres, a trend that will blight many retailers.
“Despite the uncertainty of COVID-19, Next continues to diversify and innovate, buying a majority stake in Victoria Secret to operate its stores and online platform, as well as introducing concessions in some Next stores and stocking items on Next’s website. This will help Next better compete in the lingerie market if it focuses on becoming more inclusive and incorporating more casual trends into its ranges to regain lost relevance. Additionally, Next has launched its first “Total Platform” website for Childsplay Clothing, which allows a partner brand to plug into Next’s services to handle the logistics of selling online and in-store; and its beauty halls trial in four locations will be open by Christmas.”
Richard Lim, CEO, Retail Economics, said: “The impact of the pandemic decimated demand for new outfits but these figures show resilience during these horrendous conditions. This is about weathering the storm more effectively than the competition and Next is well positioned following years of investment in their digital proposition while many others remain in survival mode. Their e-com platform, slick distribution centres and strategic partnerships have differentiated them from their competitors and they are well-positioned to capitalise on the new wave of online shoppers emerging due to the pandemic.
“Indeed, 45% of consumers have shopped online for a retail product that they have previously only ever purchased in a store since lockdown [Retail Economics]. This new wave of online shoppers has broken through the initial barriers of setting up online accounts, entering payment details and overcome issues of trust. It will provide a rich opportunity for those retailers who can quickly pivot their proposition to align with a new set of customer expectations.